Oil prices jumped nearly two dollars a barrel Monday as Russia's military advance into Ukraine raised fears of economic sanctions against one of the world's major energy producers. Natural gas prices surged at the prospect of a decrease in global supplies.
By early afternoon in Europe, benchmark U.S. crude for April delivery was up $1.92 to $104.51 a barrel in electronic trading on the New York Mercantile Exchange. On Friday, the Nymex contract added 19 cents to close at $102.59.
Markets were responding as thousands of Russian troops solidified control over Crimea in the Ukraine. The U.S. warned Sunday that Moscow could face economic penalties unless it retreats.
"Ultimately the market wants to know to what extent the West will impose economic sanctions on Russia if there is bloodshed and further deterioration," IG market strategist Chris Weston said in a report.
The military advance into Crimea, a predominantly Russian speaking region that is friendly to Moscow, came after protesters ousted Ukraine's pro-Russian president, Viktor Yanukovych, over his decision to turn the country toward Russia instead of the European Union. Yanukovych fled to Russia after more than 80 people were killed in the protests in the capital Kiev, but insists he's still president.
Russia was the world's second-largest producer of oil in 2012, accounting for 12.6 percent of global supplies, according to the International Energy Agency. It was also the world's top exporter of natural gas in that year, the IEA said, so any economic sanctions taken against Moscow would limit world supply and push up prices.
"It is natural gas fundamentals which are probably more exposed to the current crisis, given Ukraine's key role as a transit country for Russian natural gas supplies into the European Union," analysts from JBC Energy in Vienna said in a note to clients. "However, an unusually mild winter has left most European gas inventories at the highest seasonal levels in years, meaning that markets would be relatively well prepared for any kind of supply disruption, in the short term at least."
Brent crude, a benchmark for international varieties of crude, was up $2.88 to $111.95 on the ICE Futures exchange in London.
"The lion's share of (Russia's) 5 million barrels per day of oil exports go to Europe, so it is hardly surprising that Brent has risen in response to the conflict, even though the risk of actual delivery outages is small," said analysts at Commerzbank in Frankfurt.
In other energy futures trading on Nymex:
-- Wholesale gasoline rose 6.08 cents to $3.0382 per gallon.
-- Heating oil added 6.97 cents to $3.086 per gallon.
-- Natural gas climbed 7.8 cents to $4.687 per 1,000 cubic feet.